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Suppose a firms stock is selling for $10.50. They just paid a $1 dividend and...

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Finance

Suppose a firms stock is selling for $10.50. They just paid a $1 dividend and dividends are expected to grow at 5% per year.

What is the required return?

R = [$1 (1.05)]/10.50 + 0.05 = 15%

What is the dividend yield? (D1/P0)

[$1 (1.05)]/$10.50 = 10%

What is the capital gains yield?

Answer & Explanation Solved by verified expert
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